You sit down with a well mixed deck containing A cards marked "+" and B cards marked "—". You may draw cards from this deck as long as you want, i.e., you can stop playing at any point. Each time you draw a + card you are given $1 and each time you draw a — card you have to pay $1. Cards are not replaced after having been drawn.

What would be a fair amount to pay for the right to play (i.e., what is the expected payoff) and under what circumstance should a player cease drawing?

(In reply to re: Incorrect assumption by ed bottemiller)

Hi Ed,

Here are the answer your questions:

(1) does the putative player know the values of A and B at the outset?

Yes, he does.

(2) is the fee to play (re "a fair amount to pay for the right to play") a one-time up-front fee, or is it before each draw? 

It is a one-time, up-front fee. 

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I try to be clear as possible with the problem formulation. Sorry if these points needed more attention.

 

Posted by FrankM on 2008-03-24 16:33:41